Rubio pushes for student loan aid for victims of terrorism

JillianBerman

Reporter

As the new administration and Republican congress get under way, one prominent senator is reviving a proposal to tweak the student loan system that died in the last Congress.

Sen. Marco Rubio (R-Florida), reintroduced a bill earlier this month that would allow victims of terrorist attacks to pause payments on their federal student loans for a year. Depending on the type of federal student loan, the bill would also stop the interest from accruing during that period.

The proposal is one of many in recent months looking to enshrine protections for targeted groups of federal student loan borrowers, even as borrowers broadly struggle in many cases to take advantage of the protections already afforded to them.

Federal student loan borrowers are already entitled to three years of deferment in cases of economic hardship. But Rubio’s bill would provide an extra year for victims of terrorism and explicitly designate terrorism victims as a demographic that qualifies for flexibility when it comes to their student debt. If enacted, the proposal would likely apply to a very small group of borrowers. Roughly 35,320 people were injured world-wide in terrorist attacks in 2015, according to the State Department.

“There’s been a trend recently in proposals to add new specialized forbearances,” said Mark Kantrowitz, the publisher of Cappex.com, a college and scholarship search site. He cited Hillary Clinton’s proposal during her campaign for president to allow young entrepreneurs to pause their student loans as an example.

These proposals are appealing to lawmakers because they typically don’t have high costs, allow policy makers to show they’re acting on behalf of their constituents and are deeply personal to the lawmaker. For example, Rubio said in a press release that he came up with the idea for the bill when his office intervened on behalf of a student loan borrower who was struggling with his debt after surviving the terrorist attack on the Pulse nightclub last year.

While borrowers coping with extreme circumstances may certainly need help managing their student debt, Kantrowitz questions the wisdom of creating special protections for very specific demographics, given that federal student loan borrowers already have access to deferment and forbearance time for economic hardship as well as loan forgiveness in the case of permanent disability.

“What are we going to do have every possible circumstance have its own separate deferment and forbearance?” he said. “There’s an incredibly long potential list of things that could have this sort of treatment.”

Still, there is some precedent for policy makers to protect certain groups of student loan borrowers in extreme situations. In the wake of Hurricane Katrina, officials created an option for borrowers adversely affected by a natural disaster to obtain an administrative forbearance -- a period where payments are paused but interest still builds -- for up to three months. Lawmakers also created a forgiveness program for victims of the Sept. 11 attacks, first responders and their spouses and parents.

Though in some cases, these borrowers might be able to access protections already available under the student loan program, even without tailored options, some kind of automatic forgiveness or deferment option can be beneficial, said Adam Minsky, a Boston-based lawyer specializing in student loan cases. In the wake of the Boston Marathon bombing, Minsky worked with victims and their families as they struggled to make the necessary phone calls and gather the relevant paperwork to navigate the relatively complicated student loan system and its benefits.

“When you’re dealing with something like violence and injuries and hospital stays (a student loan) is not something that is particularly high on the priority list,” he said. “It really stinks when you’re going through a trauma like that and then your student loans go into default as well, it’s unfair and it adds to tragedy.”

Though coping with a student loan in the wake of trauma is a real issue for a small subset of borrowers, Minksy said he’s skeptical that the government and its student loan servicers, could successfully implement a provision aimed at helping this group. First there’s the challenge of determining who qualifies. In the press release, Rubio said the federal agency responsible for investigating any terrorist attack would be responsible for identifying the victims. There’s also evidence that student loan borrowers struggle to gain access to the protections that are already on the books.

“You have a complex system, you have servicing that may not always be up to par and now you’re going to introduce something else that might further confuse things,” said Kevin Fudge, the ombudsman at American Student Assistance, a nonprofit focused on education finance.

Borrowers who reach out to ASA for help managing their loans often say they weren’t aware of the options available to them either because the information is hard to track down or because their servicer wasn’t forthcoming about the protections afforded to federal student loan borrowers. Adding another protection only works if eligible borrowers are aware of and can take effectively take advantage of it, Fudge said. That means policy makers need to have a plan to ensure they’ll effectively communicate the new option to borrowers and servicers.

“It’s not just enough to create a policy and say ‘hey we did our jobs’, there’s much more to it than that,” he said.

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